During January, 7,000 Direct Labor Hours Were Worked at a Standard

question 86

Multiple Choice

During January, 7,000 direct labor hours were worked at a standard cost of $20 per hour.If the direct labor rate variance for January was $17,500 favorable, the actual cost per direct labor hour must be

• A) $17.50.
• B) $20.00.
• C) $22.50.
• D) $25.00.

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Definitions:

Economies of Scale

The cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units of output.

Constant Returns

A situation in production where increasing the inputs by any proportionate amount results in an equal proportionate increase in outputs.

Production Costs

The total expense incurred in manufacturing a product or providing a service, including labor, materials, and overhead costs.

Average Total Cost

The overall expenditure on production when split by the volume of products made.